Japan’s household spending fell at its fastest pace in nearly two years in October, raising fresh concerns about the resilience of consumer demand just as the Bank of Japan prepares for a potential rate hike this month.
Government data showed spending fell 3.0% y/y, the first drop in six months and far worse than the expected 1.0% rise. Month-on-month spending slumped 3.5%, versus forecasts for a modest gain.
Officials said weakness was concentrated in food, leisure and auto-related spending, though cautioned it is too early to conclude that consumption has stalled, noting overall demand remains in a “recovery stage.”
The figures arrive at a crucial moment for the BOJ. While policymakers have kept rates unchanged since January to assess the impact of U.S. tariffs, persistent inflation and a weak yen have pushed the board toward supporting a December (19th) hike. Economists warn, however, that soft consumption could limit the pace of any tightening beyond this month.
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